Yesterday Nicholas Negroponte, former director of the Massachusetts Institute of Technology Media Lab now head of the nonprofit One Laptop Per Child project, gave analysts and journalists an update on the OLPC project. Two big changes were announced - the $100 OLPC is now the $175 OLPC, and it will be able to run Windows.

Even in a free and open market where there are free and legal alternatives to using Windows and Office, there's a huge demand for Microsoft softwareThe OLPC was seen as a way for open source Linux distributions to achieve massive exposure in developing countries, but now Negroponte says that the OLPC machine will be able to run Windows as well as Linux. Details are sketchy but Negroponte did confirm that the XO's developers have been working with Microsoft to get the OLPC up to spec for Windows.

This new information by Negroponte pulls the announcement last week from Microsoft that it was planning on releasing a $3 Windows/Office software bundle into focus. Microsoft clearly doesn't want to see millions of OLPC machines running Linux and has now offered an alternative. There no confirmation as of yet that these two announcements are in any way linked, but I'd be very surprised if they aren't. Microsoft doesn't want millions of OLPC systems running Linux and open source software, the OLPC will seem more credible with Microsoft on board (no matter what you think of Microsoft, this is true, business is business and having Microsoft on board will be a boost to the project.

This I believe will be a severe blow for open source community. Think about it this way. Many of the countries that have expressed an interest in the OLPC are countries where there are high rates of software piracy, especially of Microsoft IP. Even in a free and open market where there are free and legal alternatives to using Windows and Office, there's a huge demand for Microsoft software because this is seen as the "industry standard." Based on this, my guess is that governments will choose cheap Microsoft software over free open source and this will make sure that Microsoft gets a firm foot in the door into these emerging economies. Since the $3 bundle will feature special editions of Office and Windows, and since Microsoft will be seen as offering a helping hand, all rumors of monopoly will be defused. Check to the king.